Barack Obama breached the constitution when he bypassed Congress to make appointments to a labour relations panel, a federal appeal court ruled on Friday in a decision that was condemned by the White House as "novel and unprecedented".

The judgement, from a three-judge panel of the US court of appeals for the DC circuit and regarding the filling of vacancies at the the National Labor Relations Board (NLRB), represents a significant legal victory for Republicans and big business. It could also severely restrict the president's use of a constitutional provision that permits him to directly appoint officials without congressional approval.

Successive presidents have used the provision to place hundreds of officials who have been rejected, or are likely to be rejected, by the Senate at confirmation hearings.

But in what lawyers for the Republican congressional delegation called a "stinging rebuke" to Obama, the court narrowed the president's authority considerably by ruling that the constitution only permits him to make those appointments when the vacancy occurs during a recess between individual Congresses, such as occurred earlier this month when a newly elected Congress took office. Any appointment must then be made during the same recess.

"The filling up of a vacancy that happens during a recess must be done during the same recess in which the vacancy arose," the court said.

The ruling struck down the president's appointment of three people to the NLRB a year ago, but if it stands it is likely to have much wider implications.

Anthony Riedel of the National Right to Work Foundation, which is fighting several cases seeking to have NLRB rulings overturned on the grounds that the appointments were invalid, described the ruling as a "game changer".

"What the court did pretty much took a strict constructionist view of the constitution and said that the president cannot make recess appointments unless during the recess in which one Congress turns into the next Congress. It also said that the vacancy must have occurred within that recess," he said. "This is a game changer on a broader scale of how the president has the power to make recess appointments during a recess."

The court decision came in response to a legal challenge by the owners of a soft-drinks bottling plant, after the NLRB ruled against them in a union dispute. The company claimed Obama did not have the power to directly appoint the three officials to the NLRB last year while the Senate was on a 20-day holiday, and said the board's ruling was therefore invalid.

The dispute centres on article two of the constitution, which gives the president "the power to fill up all vacancies that may happen during the recess of the Senate".

Successive administrations have interpreted that as meaning whenever the Senate takes a break, such as during Christmas and summer holidays. Obama has invoked the article 32 times to make recess appointments. His predecessor, George W Bush, used it 99 times. But the court ruled that the framers of the constitution had a different meaning in mind.

At the time the article was written, Congress sat far less frequently, sometimes for less than half of the year.

"There is no reason the framers would have permitted the President to wait until some future intersession recess to make a recess appointment, for the Senate would have been sitting in session during the intervening period and available to consider nominations," the court said on Friday.

Lawyers for the bottling company argued that holidays did not amount to a recess because although senators were away from Washington, the Senate still effectively remained sitting.

"Such short intra-session breaks are not recesses. Otherwise, every weekend, night, or lunch break would be a 'recess' too," they told the court.

The court agreed, and noted that the House of Representatives had already returned to work the day before the appointments, meaning that Congress was in session even if senators were not in attendance.

Republicans joined the legal action, arguing that "the president usurped the Senate's control of its own procedures".

"By appointing officers without the Senate's consent, he took away its right to review and reject his nominations," they said.

The US justice department told the court that the Senate does no work, and does not fulfill its role to provide advice or consent on presidential nominations, when it takes holidays and therefore is not in session.

Democrats in Congress led the way in attempting to block direct presidential appointments during President George Bush senior's administration. They merely adjourned Senate sittings during holiday periods, rather than going into recess.

The American Center for Law and Justice, which represented the House of Representatives speaker, John Boehner, in the case, welcomed the ruling.

"This decision represents a stinging rebuke to the unprecedented and unconstitutional actions of President Obama," said the ACLJ chief counsel, Jay Sekulow.

"This decision is sound and well-reasoned and respects both the constitution and the separation of powers. From the very beginning, no one questioned the President's authority to make recess appointments, but those must occur when the Senate is in recess, which we asserted, and the appeals court concluded, is clearly not the case here. While the Justice Department may decide to appeal this decision to the supreme court, the appeals court decision today sends a strong message rejecting this presidential overreach."

The immediate implications of the ruling for the NLRB are unclear. Riedel said it could potentially invalidate hundreds of board decisions over the past year, and may affect other cases in the pipeline elsewhere in the country including several being handled by his own organisation.

"The NLRB has been handing down very biased decisions in favour of big labor so we're pleased that there's a chance these decisions will now be invalidated because the board has been seen to not have a quorum," he said.

The White House disagreed. "This court decision does not effect this operation, their ability to function," said Jay Carney, Obama's spokesman.

However the judgement could affect other recess appointments, notably that of Richard Cordray, who was put in place by Obama to head the newly-formed consumer financial protection bureau, after he was rejected by Congress. At the time, Boehner accused Obama of "trampling our system of separation of powers".